GM to sell stake in Suzuki to raise cash

TOKYO -- Cash-strapped General Motors will sell its entire stake in Suzuki for 22.37 billion yen ($230 million), the automaker's latest move to stay afloat while awaiting a decision on government aid for the industry.

Suzuki said Monday that it would buy back the 3.02% stake from the American auto giant, which is seeking a $25 billion government lifeline, together with Ford and Chrysler, to weather the deepening economic crisis.

While the sale is indicative of GM's near-term liquidity challenges, the proceeds are not very meaningful, Buckingham Research Group analyst Joseph Amaturo said in a note to investors.

"GM is expected to burn $4 billion to $5 billion in (the fourth-quarter) or roughly $1.5 billion per month. Hence, the cash proceeds from the sale of its equity stake will not even cover one week of expected cash burn," Amaturo said.

Hit by the worst sales slump in more than 25 years and frozen credit, GM has warned that it might not survive through year's end without government's support.

Republican opponents of an auto industry bailout have branded the industry a "dinosaur" whose "day of reckoning" is near, while Democrats pledged Sunday to do their best to get Detroit a slice of the $700 billion originally earmarked for a Wall Street rescue.

Suzuki said GM's stake sale is necessary for the ailing American automaker to raise capital, but the Japanese company said it would continue a business partnership with GM.

"We fully understand the necessity for GM to raise cash," Suzuki chairman and chief executive Osamu Suzuki said. He said he is in close contact with GM chief executive Rick Wagoner, and the two companies would keep joint projects, including the development of hybrid vehicles and a joint venture for sports utility vehicles in Canada.

The GM-Suzuki partnership dates to 1981, but those ties loosened after GM sold a 17% stake in Suzuki in 2006, leaving it with 3%.

GM lost $2.5 billion in the third quarter and warned that it could run out of cash in 2009 if the U.S. economic slump continues and it doesn't get government help.